We recently compiled a list of the 11 Best Fundamentally Strong Penny Stocks to Buy Now. In this article, we are going to take a look at where Arko Corp. (NASDAQ:ARKO) stands against the other fundamentally strong penny stocks.

Fundamentally strong penny stocks can represent highly attractive investment opportunities, primarily because they tend to be underfollowed companies operating outside the radar of most institutional investors and prominent sell-side analysts. Due to limited coverage, these stocks often remain hidden gems with significant untapped potential, making them ideal candidates for investors seeking outsized returns through diligent research and stock picking. Unlike speculative penny stocks, those supported by solid financial fundamentals – such as solid revenue growth, positive profitability, manageable debt levels, and robust performance even during economic slowdowns – indicate higher quality and reduced downside risk. Research consistently suggests that investing in undervalued, fundamentally strong small-cap or micro-cap (which are usually penny stocks) companies can generate superior long-term performance, largely because the market eventually recognizes and appropriately values their underlying quality.

READ ALSO: 12 Best Fundamental Stocks to Buy Now

While fundamentally strong penny stocks can offer compelling upside, exposure to them should be carefully timed, as their performance tends to be cyclical and highly sensitive to broader market sentiment. Historically, penny stocks have outperformed during periods of economic recovery, early bull markets, and risk-on environments. In contrast, during times of heightened volatility, tightening monetary policy, or flight-to-safety phases, these stocks often underperform due to their perceived risk and lower liquidity. That’s exactly what has been happening in the last 2 months since the inauguration of the new US administration – the small cap sector (as proxied by ETFs) has reached a new 5-year low on a relative basis vs. the broad market in March 2025 as the Trump 2.0 tariff turmoil has caused significant declines in valuations. Even the Federal Reserve Chair Jerome Powell recognizes the unstable outlook as he used the word “uncertainty” 16 times in his press conference last week.

As the reputable Yardeni Research boutique has put it,

“Markets continue to suggest that economic growth outside of the US is increasingly likely to improve while downside risks to US growth are rising.”

As a result, US stock valuation multiples are falling closer to their international counterparts. We believe this evolution has created opportunities for the most courageous investors willing to take a contrarian stance – the stock valuations suggest weakness, all while economic indicators reveal that the backbone of the US economy is still strong. For reference, the labor market remains strong, with no meaningful spike in jobless claims, which reinforces our belief that consumers remain strong. Likewise, business activity (as proxied by PMI) remained elevated in March, and employment surged. With a healthy consumer and industrial sector, the odds are that the upcoming months will not bring any meaningful economic slowdown, which is now becoming increasingly anticipated by analysts.

With that being said, the key takeaway for readers is that small caps, and particularly penny stocks, could become favored again, as the new batch of economic indicators suggests a strong economy going forward. Moreover, the recent 10% correction in the US stock market valuations offers more affordable opportunities to seek entry points. In this context, we believe that fundamentally strong penny stocks should be preferred by investors, as their higher quality and resilience raise the odds that they will deliver a satisfactory performance and outperform the broad market.

Our Methodology

To find fundamentally strong penny stocks we used Finviz to filter for stocks with a stock price below $5.00, with at least 10% revenue growth in the last 3 years. Then we manually selected companies with stable businesses, established product lines, and a demonstrated history of performing well even during economic slowdowns. Finally, we compare the list with our Q4 2024 proprietary database of hedge funds’ ownership and include in the article the top 11 stocks with the largest number of hedge funds that own the stock.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Arko Corp. (NASDAQ:ARKO)

Number of Hedge Fund Holders: 21

Arko Corp. (NASDAQ:ARKO) is a convenience store operator and fuel retailer in the United States, operating through its primary subsidiary, GPM Investments. The company operates a network of company-operated stores and dealer locations under multiple regional and national brands. ARKO’s business segments include retail, wholesale, and fleet fueling, offering convenience products, prepared foods, and motor fuels. It sources fuel from major oil companies and independent refiners and sells it through both owned and third-party sites.

Arko Corp. (NASDAQ:ARKO) faced a challenging year in 2024 amid persistent inflation and constrained consumer spending, delivering results near the midpoint of their annual guidance. The company made significant progress in its transformation plan, notably exceeding targets in its dealerization program by converting more than 150 retail stores to dealer sites in 2024, with approximately 100 more stores planned for conversion by the end of Q1 2025. The dealerization program is expected to generate an annualized benefit exceeding $20 million to combined wholesale and retail segment operating income, with additional opportunity from G&A expense reduction.

In response to evolving customer preferences, Arko Corp. (NASDAQ:ARKO) launched strategic initiatives including the “Fueling Americas Future” campaign, offering customers up to $2 off per gallon for up to 20 gallons when purchasing value promotions inside stores. The company’s loyalty program showed strong performance, with enrolled members spending an average of $104 per month, nearly 60% more than non-enrolled customers, and visiting stores about 3 more times per month. Looking ahead to 2025, management expects total company adjusted EBITDA to be in the range of $233 million to $253 million, assuming a retail fuel margin of $0.395 to $0.415 per gallon and mid-teen percent operating profit growth in the Wholesale segment. With 21 hedge funds owning the stock and strong guidance ahead, ARKO is one of the best fundamental stocks to buy now.

Overall ARKO ranks 3rd on our list of the 11 best fundamentally strong penny stocks to buy now. While we acknowledge the potential of ARKO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ARKO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.